Rearming the world

Why nations are suddenly locked in an arms race unseen since the early days of the Cold War

LAST SUMMER, AS Americans focused on the surge in Iraq, most ignored a military exercise with a potentially more far-reaching impact. In a remote location in the Ural Mountains, Russia, China, and several Central Asian nations gathered for a massive war game, ironically dubbed "Peace Mission 2007."

Thousands of troops, armored vehicles, fighter-bombers, and attack helicopters stormed a town in a mock battle that was supposed to simulate fighting a terrorist takeover. Beneath its antiterror veneer, Peace Mission 2007 was a classic display of military readiness: When it was over, the troops paraded before their assembled defense chiefs, and the whole event laid the groundwork for a closer military alliance among the participating nations.

That such an exercise was held at all might seem shocking. Despite the global war on terrorism, and a steady drumbeat of civil conflicts, no war involving a major power like Russia has occurred in decades, and no external enemy threatens any of the Central Asian nations.

But the exercise highlighted an alarming new reality. With much less fanfare than the early days of the Cold War, the world is entering a new arms race, and with it, a dangerous new web of military relationships. According to the Stockholm International Peace Research Institute, which tracks international armed forces spending, between 1997 and 2006 global military expenditures jumped by nearly 40 percent. Driven mainly by anxiety over oil and natural resources, countries are building their arsenals of conventional weapons at a rate not seen in decades, beefing up their armies and navies, and forging potential new alliances that could divide up the world in unpredictable ways.

Much of this new arms spending is concentrated among the world's biggest consumers of resources, which are trying to protect their access to energy, and the biggest producers of resources, which are taking advantage of their new wealth to build up their defenses at a rate that would have been unthinkable for a developing country until recently.

This power shift comes with enormous implications for the United States and its Western allies. With more military power in the hands of authoritarian and sometimes unstable states, the arms race creates a growing possibility for real state-to-state conflict - a prospect that would dwarf even a major terror attack in its power to disrupt the world's stability. It also will force the West to change, to make its own plans to shore up resources, and to get used to a world arsenal it can no longer dominate.

For much of the past six decades, the world hung in a kind of armed equilibrium, with major powers unchallenged in their military and economic preeminence. During the Cold War, it was ideology that occupied the foreground for strategic thinkers; and even more recently, the idea of a power struggle driven by resources seemed remote.

But this situation has changed dramatically in just the past decade. As easily accessible global stocks of oil dwindle, the world supply of oil and gas has been concentrated in a smaller and smaller number of hands over just the past decade. Some 80 percent of all reserves now are concentrated in fewer than 10 nations.

The biggest consumers desperately want to protect their secure flows of oil and gas from this handful of key suppliers, while simultaneously preventing their rivals from inking deals with resource-rich nations.

The result, in some cases, is alliances between consumers and producers; in others, it is new and unexpected links. Middle East specialist Flynt Leverett calls some of these new relationships the emerging "Axis of Oil," an informal alliance between oil producers like Venezuela, Kazakhstan, Iran, and Russia, which are increasing state control over their petroleum, and powerful authoritarian developing nations desperately short of resources.

The biggest of these nations is China, which will surpass the United States in its petroleum use within the next two decades. And, fittingly, it is China that is driving a great deal of the current arms race.

It has been increasing its defense budget by roughly 20 percent annually, and begun transforming the People's Liberation Army, historically an overpoliticized, undertrained force, into a leaner, truly modern fighting machine. "The pace and scope of China's military expansion are startling," says John Tkacik, a China analyst at the Heritage Foundation, a think tank in Washington.

Meanwhile, China has also been inking big military deals with new allies across the globe. In 2004, China signed a deal with Iran in which it will spend as much as $100 billion on future supplies of Iranian petroleum, and Iran has become one of China's biggest arms clients. To keep strong links with Sudan, which sends roughly half of all its oil to China, Beijing has provided weapons to the Khartoum regime, despite international pressure in the wake of the Darfur genocide.

Over the past decade, China has been building other types of alliances as well - training other countries' army officers, for instance, with the kind of education programs once dominated by the Pentagon. In the Philippines, where the military historically had deep ties to America and where China has inked a joint offshore oil exploration deal, one top defense official says many of his leading officers now head to China for short courses. "This is now considered relatively prestigious, to go to China," agrees Philippine defense analyst Rommel Banlaoi. "That wouldn't have been true a few years ago."

In oil-rich Venezuela, China has been training defense satellite technicians, elite forces, and other military personnel. China has also helped Hugo Chavez revamp his oil infrastructure, and Venezuela's president has vowed to roughly triple his shipments to Beijing in the coming years. In Central Asia, Chinese oil companies, aided by large loan and aid packages from Chinese state-linked banks, have helped leading petroleum producers in that region orient new pipelines toward China. And with Central Asian nations that themselves possess aging, post-Soviet armed forces, China has become a major military player.

China is only one of the drivers in the new global arms race. Playing off its role as both energy supplier and, in some cases, consumer, Russia has increased its arms sales to border nations in the Caspian region in order to further its energy links. In Central Asia, the Kremlin has stepped up training for local militaries, and in Indonesia, one of the world's largest gas producers, then-Russian President Vladimir Putin last summer signed a deal to sell some $6 billion in new weapons. Under Putin, the Kremlin also vowed to rebuild its navy. "It's clear that a new arms race is unfolding in the world," Putin declared just before leaving office.

India has been building its arsenal, too, launching a massive ballistic missile program. Singapore has vastly upgraded its forces, and in the Middle East, Saudi Arabia recently bought billions of dollars' worth of new fighter jets from Europe, new spending nearly matched by some of the other Gulf states.

In part to counter the efforts of Russia and China, Washington and other leading industrialized powers are building their own military links - and again, these have little to do with ideological agreement.

With Australia, Singapore, Japan, and India - three democracies and one essentially authoritarian state - Washington has started holding joint military exercises, including a vast war game last summer at virtually the same time as Peace Mission 2007. On a recent visit to India by Secretary of Defense Robert Gates, another top defense official told reporters that the Pentagon was building ties to India "as a hedge" against China.

In the Caspian region, the United States is building its own military-energy ties. Over the past decade, it has boosted defense links to nations like Azerbaijan and Georgia critical to petroleum pipelines serving America, while simultaneously offering public White House meetings to Caspian leaders - even to Azeri President Ilham Aliyev, accused of massive fraud in the past election. Across oil-rich Central Asia, the Pentagon has negotiated deals to allow US forces to operate out of bases in many Central Asian states, and is now cultivating Turkmenistan - a major gas producer where, since the death of its long-ruling autocratic leader, the nation has taken some tentative steps to re-engage with the West.

In the Middle East, the United States is also building a new alliance to contain Iran's influence. Over the past year, the Bush administration aggressively pressured Congress to allow Washington to sell some $20 billion worth of arms to Saudi Arabia in order to build up a bulwark against Iran.

In many ways, these new deals echo the old "Great Game," the competition among Western powers for influence in Central Asia. But today the situation is far more complex: With so much money in the hands of resource-rich countries, the line is now much fuzzier between major powers and the developing nations whose resources they are sparring over.

It is also risky. Although this new arms race might produce nothing more than bigger toys for the Pentagon and the People's Liberation Army, many defense and energy experts think this is unlikely. The buildup could push opponents toward damaging standoffs, as in the Cold War, and even escalate into real clashes.

In some arenas, the new alliances already seem to be sparking conflict. With China's more sophisticated submarine fleet increasingly moving into seas claimed by Japan, and Japan's own self-defense forces becoming more aggressive, Japan publicly exposed Chinese sub incursions, leading to perhaps the worst downturn in Beijing-Tokyo relations in recent memory.

Not all foreign policy experts believe that the world is simply lining up for a future of resource-driven wars. Carnegie Endowment scholar Robert Kagan, who is releasing a new book on the topic, "The Return of History and the End of Dreams," argues that authoritarian nations like China and Russia are still driven by ideology in their alliances - specifically, their opposition to democracy. For Kagan, the political structure of these rising powers matters as much as the energy they seek: If they develop successfully, they could suggest to other countries that authoritarian rule can bring great economic growth.

Others doubt that the world is running out of oil and gas, and without that pressure, tensions are likely to be much less severe. Although many prominent oil experts have embraced the Peak Oil theory, the idea that world oil production has already passed its maximum capacity and is now in decline, others are not so sure. Cambridge Energy Research Associates, one of the world's leading energy forecasters, two years ago released a comprehensive analysis in which it estimated that global oil reserves actually were considerably higher than many Peak Oil analysts claim.

But even if CERA's claims are borne out, the arms race is already on. And as it metastasizes, the world is becoming a far different place than it was just a decade ago. By the time the next president takes office in 2009, he or she will have to reimagine how Washington sees the world. And by then, Peace Mission's impact may already have spread.

Joshua Kurlantzick is a Visiting Scholar at the Carnegie Endowment for International Peace and author of "Charm Offensive: How China's Soft Power is Transforming the World." He can be reached at jkurlantzick@ceip.org.